Persistent volatility drives consistent uncertainty for renewable diesel and biodiesel producers. With increased regulatory action and production growth on the horizon, alongside mounting geopolitical tensions, stakeholders need a weekly insight into their operational costs and returns.
What happened?
US renewable diesel margins rose for a second consecutive week as diesel strength and stronger LCFS credit prices were only partially offset by weaker D4 RINs.
PBF Energy Inc. announced August 3 that its St. Bernard renewable diesel facility in Chalmette, Louisiana, is operational. This includes a pretreatment unit (PTU) at the 320MM gallon per year facility. St. Bernard Renewables (SBR) is a 50-50 JV with Italian oil giant ENI.
US imports of renewable diesel reached a record high of 48.3MM gallons in the month of May, according to the latest EIA data. This level was nearly three times the amount imported during the month prior. Nearly 85% of US imports originated in Singapore with the remainder coming from Finland.
Vertex Energy Inc. reached 8,000 Bbl/d phase 1 capacity at its Mobile, Alabama, facility during the second quarter. Vertex received federal approval to generate D4 RINs earlier this year. The company announced its first sale of 110,000 Bbl to Idemitsu Apollo in June 2023.
Valero’s renewable diesel arm Diamond Green Diesel (DGD), a joint venture with Darling Ingredients Inc., reported $440 million in operating income for Q2, more than doubling the $152 million recorded last year. RD sales came in at 4.4 million gallons per day, doubling last year’s output. Valero expects renewable diesel output to total 1.2 billion gallons for the year. DGD’s 470 million gallon Port Arthur RD/SAF facility is on schedule for 2025 completion. Half of the capacity will be dedicated to SAF production.
June D4 RIN generation fell to 2.04 billion credits, down by 70MM credits, or 3.3%, from the May all-time high of 2.11 billion RINs. Domestic and foreign renewable diesel generation accounted for 56% of total D4 generation, down from last month’s 59%.
Global Clean Energy secured a $110 million loan to proceed with construction of its Bakersfield, California renewable diesel facility. The project is behind schedule and has run more than $600 million over budget prompting ExxonMobil to nullify its offtake agreement. The 15,000 Bbl/d project is the site of the former Big West refinery and will use camelina as feedstock.
The EPA denied 26 small refinery exemptions covering the 2016-2018 and 2021-2023 compliance years on July 14. The move was consistent with the EPA’s blanket SRE denials under the Biden Administration. The two remaining SREs are for the 2018 compliance year.
The US Energy Information Administration (EIA) trimmed its 2024 RD production forecast by 2.8% to 219,000 Bbl/d. The Administration assumed lower plant utilization rates and more plant cancellations in response to the June 21st release of the Environmental Protection Agency’s (EPA) final Renewable Fuel Standard rule. The rule set biofuel requirements for 2023-2025, with the advanced biofuel requirement falling short of expectations. The EIA increased its 2023 production estimate by 2.2% from its June forecast to 161,000 Bbl/d as the Administration is citing recent production increases.
Twelve broke ground on a commercial scale power-to-liquid eSAF facility on July 11. The facility is expected to produce 5 Bbl/d, or approximately 40,000 gallons per year, by mid-2024, with plans to rapidly increase capacity. Alaska Airlines, Microsoft, and Shopify already have offtake arrangements with the Moses Lake facility.
HF Sinclair lost a lawsuit seeking the return of RINs used to cover 2018 compliance for its 75,000 Bbl/d Sinclair, Wyoming, refinery, according to Argus Media Inc. The refiner had sought a small refinery waiver from the EPA which was denied in 2019 and upheld in 2022. The Renewable Fuel Standard identifies small refineries as facilities producing no more than 75,000 Bbl/d. A refiner can also apply for a waiver by demonstrating disproportionate economic harm.
Canada’s first renewable diesel facility completed construction and will soon begin production. Tidewater Renewables’ 46MM gallons/yr Prince George Refinery located in British Columbia was scheduled to come online during the second quarter and aims to achieve 80% of nameplate capacity during the second half of 2023. Total capacity now sits at 47.55MM gallons/yr.
ExxonMobil exited its renewable diesel offtake agreement with Global Clean Energy Holdings as the 210mn USG/yr is running behind schedule and overbudget. The energy giant originally stated it would take such action if no product was received by July 2022. The Bakersfield, California facility is slated to run on camelina oil. Global Clean Energy Holdings rejected the notice and stated it has until 30 November to complete the project, according to the Bakersfield Californian.
Cargill announced it has put its Missouri soy crush facility on hold, citing market dynamics. The 62mn bushels per year facility was originally slated for completion in 2026.
California’s Air Resource Board (CARB) held a workshop to discuss an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. During the workshop California regulators indicated that the final scoping plan may not take effect at the start of the new year much to the disappointment of stakeholders. The regulatory body indicated that the acceleration mechanism would likely not take effect until 2H 2025.
Marathon announced that it is on pace to complete Phase II of its Martinez Project with Neste by year end bringing total production capacity to 730 million gallons/yr. Phase I was completed during 1Q23 ramping up 260 million gallons/yr of renewable diesel capacity.
Oleo-X launched a 300 million gallons/yr feedstock pretreatment facility in Pascagoula, Mississippi. The company aims to process low-carbon inedible oils and poultry fat.
Par Pacific announced a $90 million investment to build a RD/SAF facility at its existing refinery in Kapolei, Hawaii. The facility is expected to produce 4,000 Bbl/d of RD and SAF as well as renewable naphtha and LPG by 2025.
Parkland Corp. announced its decision to halt its renewable diesel project in British Columbia, Canada. The company had been coprocessing at its Burnaby Refinery with plans to build a 273,000 gallons/yr RD facility, set to come online in 2026. The company cited rising feedstock costs and advantages to US producers afforded by new credits carved out in the Inflation Reduction Act (IRA). The move could be a harbinger of slowing momentum for the RD industry which has increasingly worried about rising feedstock costs, while the numerous advantages of the US market are likely to open export markets soon.
The Washington State Senate passed a Sustainable Aviation Fuel (SAF) tax credit, following actions from the state of Illinois which issued its own SAF credit with additional tax advantages for the fuel. Washington aims to establish a $1/gallon credit with a $2/gallon cap as additional value can be earned for fuels with lower carbon emissions. The Illinois SAF credit is set at $1.50/gallon and will run from June 1, 2023, through June 1, 2033, making the state the highest returning market for SAF.
FutureFuel Corp. is considering halting biodiesel production citing rising feedstock prices, uncertainty on the permanency of certain federal tax credits and heavy competition from the renewable diesel industry. The company owns a multifeed, 59mn gallons/yr biodiesel plant in Batesville, Arkansas.
Shell scrapped plans for a 550,000 t/yr RD and SAF facility in Singapore. While no rationale was put forth, feedstock supply and the lack of mandates throughout the Asia Pacific region are likely culprits. While feedstock prices have been falling, recession fears have also been weighing on diesel values, limiting margin growth.
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